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IAG raises profits, rejects 787 for LCC

But results for Q4 worry industry analysts that it and other airlines are expanding capacity too quickly.

International Airlines Group, which owns British Airways, Iberia, Vueling and Aer Lingus, is in talks to acquire planes for its new low-cost airline Level, it confirmed while announcing another year of rising profits.

IAG’s Barcelona-based budget carrier, which was set up last year and will open a second hub in Paris this summer, currently has two Airbus A330s and will have five of them in total later this year.

This aircraft type offers a more efficient way to get the operation further off the ground than the newer Boeing 787 Dreamliner, IAG CEO Willie Walsh said.

The plan is for Level to grow to 15 aircraft by about 2022, he added, with the possibility to grow further.

“We see an opportunity with Airbus and with Boeing. The 787 more and more we see as a future opportunity in the development of Level,” he said during an annual results call.

Austria move
Walsh also said that IAG would expand in Austria this summer. A decision will be made in the next couple of weeks about how it plans to proceed, the news agency Reuters reported.

IAG failed in a bid for the Austrian airline Niki last month, with its racing champion founder Niki Lauda offering more money to buy it back. Walsh promised: “You should expect to see a stronger IAG presence in Austria.”

Disappointing quarter
IAG said it was confident about its outlook for the industry as it posted its full-year results – despite a fourth quarter that disappointed analysts. A 6% fall in fourth-quarter operating profits – which IAG blamed on disappointed changes in its employee bonus system – sent shares lower.

The group says it expects to add capacity by 6.7% this year due to what it called strong travel demand. But analysts are concerned that airlines are growing too quickly as costs such as rising fuel bills rise.

IAG posted pre-tax profits of €2.49 billion for the full year ending December 31, up 5.6% on the previous year. Revenues were up 1.8% to €22.97 billion.

“All our airlines performed extremely well with their best-ever individual financial results, strong operational performances and commitment to customer service,” Walsh commented. “The turnaround in Vueling, following the challenges of 2016, has been particularly outstanding.”

In Q4, the group reported an operating profit of €585 million, down from the previous year’s €620 million.

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